Spanish Economy Minister, Mr Rodrigo Rato unveiled yesterday the framework of a 1998 budget package that economists say is realistic and will underpin Spain's drive to take part in the launch of Europe's common currency.

Spain's conservative government has pledged to bring the budget deficit down to 2.4 per cent of gross domestic product from a projected 3 per cent this year, partly through an accelerating economic growth rate, which is seen rising to 3.4 per cent in 1998 from 3.2 per cent in 1997.

"We are looking at a clear, sustainable recovery and this budget is going to be a key factor in the recovery," Mr Rato told a news conference. "It is going to set the basis for the recovery."

The budget draft, which must be presented to the legislature by the end of September, aims for growth and fiscal austerity and sends a signal to Spain's wary neighbours that it has renounced lax finances and converted to a model of fiscal sobriety.

"I have to admit, grudgingly, that they have done a good job. They (the numbers) look realistic," said Mr Henrik Lumholdt, chief economist at Bank of America in Madrid.

If anything, economists say, most of the government's numbers do more than just add up.

After years of scorn from international financial circles, Spain's public finances now look good - and even better than it is admitting.

With this budget, the conservative government's second since it ousted the Socialists last spring after 13 years in power, Spain seems set to meet all of the EMU criteria by a healthy margin.

Although it is the 1997 budget and its numbers that are tested for fitness to participate in the single currency launch, the 1998 budget proves that this year's efforts were not a one-off and that Spain is committed to keeping its fiscal house in order.